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  • richard evans

Will today live up the hype?

A lot of hype coming into today as we await the US inflation figures and the ECB rate meeting. Both covered in their respective sections below but I must say that in the majority of cases these hugely hyped days turn out to be less exciting than expected.

Another event today that may be less exciting than hoped is the solar eclipse of the sun that is due to take place today. You’ll need to be in the Arctic to enjoy the best show, in London we are due to see just 20% of the sun covered up, although it is highly likely that the cloud cover I am currently looking at will upset any chance of seeing anything. But if it goes dark just after 11am, this is why.

USD – All eyes on the inflation print this afternoon where a MoM headline is expected to be around 0.5% and YoY could be up to 4.7%, from 4.2% last time. Anything above these will likely get the markets worrying whether the Fed are calling this right and could see a higher USD while a weaker reading should give stocks support and see USD lower.

EUR – ECB rate meeting today and while policy is expected to remain unchanged the focus will be on the pace of asset purchases. No change at all from the current EUR80bio monthly figure is likely to be regarded as dovish particularly if it is suggested it will stay at that level through Q3 2021. Remember the size of the program is so great the EUR80bio/month can continue into 2022 if need be. Any talk of lowering the monthly purchase amount could be deemed as hawkish. I reckon they’ll stick with the EUR80bio/month for now, possibly mention the chance of winding it back in a few months, but as always warn of the downside risks. We will see the latest set of economic forecasts from ECB as well.

GBP – US inflation and ECB meetings to one side, this NI protocol is the pressing issue. Biden is over here for the G7 meeting and he’ll be seeing Johnson beforehand, it is expected a new bout of cooperation between the two nations will be announced but Biden will also be firm in his demands for UK to sort out the NI issue. Like it or not, it is the UK who are not really playing by the rules, therefore we are the ones responsible for the tensions. True, the EU could be more flexible, but we agreed the deal and all its shortcomings. GBP lower on fears of EU tariffs, GBPUSD 1.4085 and EURGBP up at 0.8635 (GBPEUR 1.1580).

CAD – BoC came and went with little drama yesterday, all in line with expectations and with a reasonably optimistic outlook. They mentioned that the third Covid wave dampened activity but not enough to materially change the outlook. USDCAD was down at 1.2060 going into the announcement but has since moved up to 1.2120 helped by a slightly stronger UYSD this morning.

- 12.45 ECB rate announcement

- 13.05 BoEs Haldane speaks

- 13.30 ECB press conferernce

- 13.30 US CPI, initial jobless claims

- 18.00 BoCs Lane speaks

- 19.00 US monthly budget statement

- 23.30 NZ business PMI

- 07.00 UK GDP, industrial production

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